What term describes the premium adjustment made based on prior years' loss experience?

The term that describes the premium adjustment made based on prior years' loss experience is experience modification rating. This rating is crucial in determining how a business's workers' compensation insurance premiums will be adjusted based on its historical claim experience.

Essentially, employers with a favorable loss history—meaning they have had fewer and less severe claims—will see a reduction in their premiums over time, while those with a poor loss history may face higher premiums. This system encourages employers to maintain safer workplaces and reduce accidents by being financially accountable for their claims experience.

The experience modification rating is calculated by taking into account the employer's actual losses compared to the expected losses for businesses in the same industry. It reflects the employer's risk level and not only affects the overall cost of insurance but also influences an employer's approach to safety and risk management. This emphasis on historical performance aligns with the overarching goals of workers' compensation insurance, which is to promote a safer working environment and manage costs effectively.